Theoretical Frameworks of Financial Sustainability Strategies in Christian Tertiary Institutions

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Theoretical Framework of Financial Sustainability
The paper provides an insight on the theories which can be used to analyse situations in an organization to help in designing strategies to realize financial
sustainability and independence. This paper discusses two such theories, the consumerism and the rational choice theory, their origin, and applicability to the
proposed study.
The Consumerism Theory
The consumerism theory stems from the idea that was coined by Harvey Wiley, who by then was the head of Bureau of Chemistry in Washington D.C in the late 1800s.
Consumerism could be said to be a movement and a powerful ideology which appeared first in Western Europe about 300 years ago. As a movement it helps in promoting the
rights and powers of consumers. It’s also viewed as an ideology in which the pursuit of goods shapes social conduct. Its appearance was explained by the rise of
certain conditions which gave more emphasis on the acquisition of material objects such as: Economic progress, expanding trade which brought in new products, rise of
small shops and advertisements, emergence of cities, the collapse of religious doctrines which led to the search for material pleasures (Black, 2006).
The theory gained more momentum in the USA towards the end of 1800s when certain changes which included growth of individualism and international trade expansion,
creation of mergers as well as growth of new consumer products took place. The theory is a global phenomenon that comes up in whichever place especially when the
necessary socioeconomic circumstances come together. In the US the movement began in the late 1800s and early 1900s to protect consumers from the rampant fraud that
was being felt at such times.
The critics of the theory argue on the basis that the idea of promoting material value undermines the higher values, and they say that the theory leads to
commodification of life whereby people get judged based on what they possess (Cohen, 2003). Faith based organizations find this theory applicable as they try to become
self-sustained financially. The trade-off between promoting spiritual message and achieving financial independence through business activities remains a challenge to
the institutions.
The Rational Choice Theory
According to the majority of social scientists, it is assumed that most people are motivated by money and profit making probability and it has allowed the construction
of econometric models of human behaviour. The sociologists as well as political scientists have therefore tried to build theories on the basis of the idea that all
actions are rational in character and that people make their consumption choices after considering the opportunity costs of making such choices. Therefore, the
approach that is given details in the above sentence is what is called the Rational Choice Theory. The fact that people make rational choices was recognised by several
scientists; however it has also been observed in several occasions that some actions by certain individuals are irrational. The idea was pioneered by George Homans
(1961), who set up a basic frame of the exchange theory, which is another form of an application of rational choice theory that is being used.
He (Homans) grounded his assumptions from those of the behavioural psychologists which have remained the basis of all subsequent discussions. In the years of 1960s and
1970s other scientists extended Homans work to include more formal, mathematical models of rational action. Rational theorists have become more mathematical in their
orientation which is well aligned with the trends in microeconomics (Emerson, 2012 and Dunford, 2003). The inclination towards the more official, mathematical models
of rational action was ostensible in the areas such as theories of voting and coalition formation in political affairs, explanation of ethnic minority relations as
well as social kinesis.
The fundamental of all forms of rational choice theory is the underlying assumption that more complex social phenomena can be described and expressed in terms of
individual actions of which they are composed. The assumption therefore holds that individual human action is the basic unit of social life, and therefore, economic
theories have become focussed to how production, distribution and consumption of goods and services takes place through money and market mechanisms. The lucid choice
proponents put forward that the same ideologies can be used to comprehend interactions (Emerson, 2012) in which such funds are involved. According to this theory,
individuals are motivated by the wants which express their preferences; they act within certain constraints such as financial, time or human resource constraints among
others. To realize these several wants, the individuals must make choices that are subject to a number of constraints (Dunford, 2003).
To achieve financial independence, it can be concluded that the faith based institutions need to make rational choice in their day to day activities against a budget
limitation. The study proposes to use this theory to help in analysis so as to define the level of level-headedness in choice and predilections.
References
Black, Robert A. (2006). What Did Adam Smith Say about Self-Love? Journal of Markets and Morality.
Cohen, Lizabeth. (2003). A Consumers’ Republic. New York: Alfred A Knopf.
Dunford, C (2003). The Holy Grail of Microfinance: Helping the Poor and Sustainable? In Haper, M (ed) Micrifinance: Evolution, Achievements and Challenges. London:
ITDG Publishing.
Emerson, Jed (2012). “Risk, Return, and Impact – Understanding Diversification and Performance within an Impact Investing Portfolio,” Impact Assets (Issue Brief #2).

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